Rheinmetall takes over Denel subsidiary

The Rheinmettal Group has acquired a majority stake in South Africa’s Denel Munitions, following approval of the takeover by the country’s competition authorities, giving the German defence company access to new and strategically significant markets.

“This agreement with Rheinmetall ties in with Denel’s turnaround strategy,” Denel executive Lana Kinley said in a statement after the deal was first announced in February.

“In fact, as one of the crucial pillars of the strategy, equity partnerships with major global players will provide the Denel businesses like Munitions with world-class technology and skills, operational improvements, market access and scale to best serve its clients.”

Dusseldorf-based Rheinmetall will own 51% of the new company, to be known as Rheinmetall Denel Munition, while South African state-owned defence equipment contractor Denel will hold onto the remaining 49% stake.

“With this acquisition, which is associated with a long-range supply programme for the South African armed forces, the Rheinmetall Group continues to grow its defence business and enhance its market presence,” Rheinmetall said in a statement last week.

The company said the acquisition underscored its position as a premium global supplier of weapons and ammunition for armour, artillery and infantry, as well as a leading maker of propellants.

Rheinmetall Denel Munition commands special expertise in artillery, mortar and infantry systems as well as plant engineering.

“Annual sales of weapons, ammunition and propellants by Rheinmetall amount to approximately US$1-billion (about R7.9-billion); Denel Munitions’ sales equate to roughly a tenth of this figure,” Rheinmetall said.

Whereas the bulk of Rheinmetall Defences’ business is transacted with North Atlantic Treaty Organisation (Nato) countries, Denel Munitions’ markets include South Africa, Asia, the Middle East and South America.

“In future, Rheinmetall and its new South African subsidiary will market their expanded joint product portfolio in their respective key markets,” the company said.

In terms of the agreement, both Rheinmetall and Denel will boost investment in the new company to modernise the business operations and improve its production structures and flows, setting the stage for solid, profitable growth.